Fannie & Freddie Enter Into The Subprime World

   The Huntington Beach Mortgage Oracle is a blog site to keep people aware of changes in the mortgage industry.  In case you have been living in a cave there has been many changes in the finance world.  These changes have come about because of the things that the current administration has implemented.  The finance, banking bailouts & guideline changes are where the Fed’s, aka Obama Administration, and mortgage professionals square off.  So after many questions here are a few things to think about. 

   It does not matter what anyone thinks about Obama being elected president.  It is time to grow up as the election took place in November of 2008.  Today is July 2, 2009 and it is now time to look at the real issues.  So just for example, lets focus on the economy and not light bulbs.  The light bulb issue is a perfect example of not seeing the big picture.  The EPA at this point has not and will not allow any US company to manufacture these twist light bulbs on US soil.  These florescent twist light bulbs are made in China, the same China that is continuing to purchase US Treasury Bonds.  So here we go yet again killing another industry and the jobs that come with in. 

   There is a service life to these twist light bulbs and when that time comes where do we dispose of these bulbs.  Is this the new industry that Obama is talking about?  Currently it is illegal to put old florescent bulbs or lamps into the normal trash.  So where will these toxic twist light bulbs be discarded? 

   Obama is the President of the United States period.  It is not only permissible but expected of everyone to expect him act Presidential.  I have offered my companies services and I am sure we can match ability with any of the current Mortgage advisors to the President.  I say that with complete confidence because we have been at the front lines for years and ran our own companies successfully even in this down market. 

   Here is the first thing I would advise him on.  Stop telling the people of this country that he has put together this great new mortgage plan called the “H.A.R.P.” and it is going to save hundreds of thousands of homes.  This could not be farther from the truth and how in the world he can say this straight faced is unbelievable.

   The H.A.R.P. loan program is a program that will allow a home owner to refinance there current mortgage up to 105% of the current value without mortgage insurance.  This sounds great but the current mortgage can not have existing mortgage insurance and the current mortgage must be owned by Fannie Mae.  There are some Freddie Mac owned loan options but they have even more restrictions.  Here are the facts for the month of May 2009.  Roughly 400,000 foreclosures and roughly 11,000 H.A.R.P. loans done.  Clearly this program is doing little to help and the Fed’s know it.

   So yesterday the Fed’s made the announcement that they are coming out with 125% LTV Fannie and Freddie loan programs.  This will raise the H.A.R.P. program from 105% to 125% underwater.  The Treasury Secretary Tim Geithner made the announcement in Las Vegas and called the move “a crucial step in our broader efforts to get America’s housing market and economy on the path to recovery.”  I have read this quote several times and I keep coming to the same conclusion.  These guys must be smarter than me because I have trouble with a loan to value being higher than 100%.  This clearly makes the beginning on the Fed’s entering into the subprime arena. 

   The recent passing by the House of the “Cap & Trade” bill is a disaster in the making for the already weak mortgage industry.  There are provisions in the “Cap & Trade” bill that will require a home owner to bring their home up to “Green Standards” in order to sell it.  The Green Standards are upgrades to doors, windows, heating & cooling systems, kitchen appliances, lighting, water heaters, low flow faucets & toilets and insulation.  In this already weak housing market who has the equity to make these upgrades just to sell their home? 

  Just a few days ago Obama had yet another scripted town hall meeting.  I hear what the man is saying and I see what is happening.  I find myself thinking that Obama is a man much like a turtle on top of a fence post.  It is time to get your feet solidly on the ground and act like an American President.  We are American’s!   We have a capitalist lifestyle that rewards people for working hard.  It is clearly time for a flat tax.    

   The Future President of 2012 will be faced with the largest economic recovery in the Countries history.  We will have to see if the American people will vote for the next president with real economic understanding.  How about at the next town hall meeting we answer some real questions.  This is what a real President does.  We have real problems that need real answers.  Let’s stop telling stories about better times and unachievable goals and get down to business.  It was just three months ago Obama told us that unemplyment would not go over 8% if we pass his stimulus bill.  Today the jobless rate is 9.5%.  The highest in 26 years and we have a huge stimulus bill to pay for.  This is not real leadership, my kids can do this.    

   My staff has years of experience in structuring finance solutions for the private sector.  That is code for “we know how to get the job done!”  We tell our client’s not to wait until it is too late to correct a situation.  We are here and ready to go and I am sure our expenses are much less that your current staff’s.  If not my staff then find another company with the same ability but it is clearly time for some new thinking with real leadership.

   I will give you something to think about.  The Fed’s have given billions to the big banks of tax payer money to save them.  If I was the President of a smaller bank that did business the right way I would not be happy about this.  Today the Fed’s prime rate is a ridiculously low .50%.  The banks also borrower this money and then lend it back to the public in the form of mortgages, loans and Credit Cards.  Today most mortgages seem to be near 5.5% and I have heard of Credit Cards as high as 38%.  Unless you are using some unusual creative math this makes some huge profits for the banks. 

   Yesterday Citibank announced that they are raising their credit card interest rates to record levels before the new law kicks in.  Isn’t Citibank the bank that took the most bailout money?  Aren’t the tax payer’s now stock holders in Citibank?  We have a voice and should be able to address the chairman of the board.  Who is our representative for the Citibank stock and why isn’t this person speaking up?  

 Why is it whenever you follow the money it ends at a place that stinks?

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